Consider a CAL in which the risk-free rate is 4%, the risky portfolio P return is 11%,
Question:
Consider a CAL in which the risk-free rate is 4%, the risky portfolio P return is 11%, and the portfolio P risk is a standard deviation of 20%.
| Risk-free rate | 4% |
|---|---|
| Portfolio P Return | 11% |
| Portfolio P Standard Deviation | 20% |
A) What are the allocations to the risk-free asset and portfolio P needed to obtain expected returns of 5%?
The portfolio P weight would be % while the risk-free asset weight would be %. Round your answers to the nearest two decimal places. Include a negative sign for negative answers.
B) What are the allocations to the risk-free asset and portfolio P needed to obtain expected returns of 10%?
The portfolio P weight would be % while the risk-free asset weight would be %. Round your answers to the nearest two decimal places. Include a negative sign for negative answers.
C) What are the allocations to the risk-free asset and portfolio P needed to obtain expected returns of 13%?
The portfolio P weight would be % while the risk-free asset weight would be %. Round your answers to the nearest two decimal places. Include a negative sign for negative answers.
Expert Answer:
To answer these questions we need to use the capital allocation line CAL formula which shows the tra... View the full answer
